Colleges, Granted Flexibility, Increase Endowment Payouts

Submitted by Doug Lederman on July 1, 2009 - 3:00am

Colleges in most states have, since a national change made in 2006, been granted the authority to spend endowment money from individual funds whose value has fallen below what it was when originally made. A new survey[1] suggests that institutions have taken advantage of that additional flexibility. The study, by the Association of Governing Boards of Universities and Colleges, the National Association of College and University Business Officers, and the Commonfund Institute, finds that as of the end of 2008, 38 percent of survey participants' total endowment funds were "underwater," or now valued below the value of the original gift. While colleges previously were barred from spending an endowment fund to a level below the value of the original gift, the 2006 change -- the Uniform Prudent Management of Institutional Funds Act, which has been adopted in 38 states -- allows colleges to do so. Since the change, the survey found, 11.3 percent fewer colleges and universities have ceased discontinuing all distributions from "underwater" funds, and more are finding ways to use the money to support their institutions.